Settlement over Michigan interest-free student loan program will pay up to $1,200 to borrowers

A class-action settlement means some student loan borrowers could be getting up to $1,200 back.File Photo

LANSING -- Student loan borrowers under the old "Michigan Students First" loan program could get up to $1,200 back from the Michigan Finance Authority after a class-action settlement in a long-running suit over the end of the program.

The settlement brings to a close a dispute over the end of the program, which cut interest rates to zero on student loans after three years of payments.

Two borrowers who hadn't qualified for the rate cut, Hans Kiebler and Donovan Visser, had filed notices in February 2013 promising to sue the Michigan Finance Authority over the program's end, but the authority preemptively sued them and alleged the proposed court case endangered a commercial refinancing transaction involving the state.

After procedural maneuvering, the case ended up in the newly constituted Michigan Court of Claims, but the sides agreed to settle the case before it went to trial.

The settlement will pay out between $50 and $1,200 to an estimated 65,000 eligible borrowers who had consistently made payments on their loans but had not reached the three-year mark before the program ended.

The smallest payments will go to students who have consolidated or fully repaid their loans, while the larger payments will be for borrowers whose loans are still held by the authority. Those payments will vary based on the amount borrowed.